Textile Exporters Warn of Massive Job Losses Amid New Tariff Hike

The United States’ move to impose a 25% tariff and penalty on Indian imports is expected to deal a major blow to India’s textile and apparel exports. Industry leaders warn that the increased costs could force manufacturers into selling below production cost, potentially triggering large-scale layoffs in the country’s second-largest employment-generating sector.

India’s $37-billion textile and apparel export industry is now at a pricing disadvantage compared to competitors like Bangladesh, Vietnam, and Indonesia, which enjoy significantly lower import duties.

“We’re on a very sticky wicket now, and things are looking grim for Indian exporters,” said Sudhir Sekhri, Chairman of the Apparel Export Promotion Council (AEPC). “With their backs to the wall, exporters may be left with no choice but to sell below cost just to keep factories operational and prevent mass layoffs.”

India ranks as the world’s sixth-largest exporter of textiles and apparel, recording exports worth \$36.6 billion in FY25. The sector directly employs over 45 million people, making it the country’s second-largest employment provider. Notably, nearly 80% of the industry’s output comes from Micro, Small, and Medium Enterprise (MSME) clusters.

Rising barriers

China was left out of Friday’s tariff announcement as it remains engaged in ongoing trade negotiations with the US. A 90-day tariff truce between the two countries is set to expire on August 12, after which China could face an additional 30% duty if talks break down.

The US remains a key market for India’s ready-made garments (RMG), accounting for 33% of total garment exports in 2024. India’s share of US RMG imports grew from 4.5% in 2020 to 6% in 2024, making it the fourth-largest apparel exporter to the US, trailing China (21.9%), Vietnam, and Bangladesh. Collectively, these three countries accounted for 49% of US apparel imports last year.

Industry Calls for Prompt Policy Action

Dhamodharan emphasized the need for close collaboration between the government and industry to safeguard the hard-earned gains achieved in the US market over the past three years. AEPC Chairman Naren Sekhri added that industry representatives are scheduled to meet government officials next week to explore measures that could soften the impact of the new tariffs.

Siddhartha Rajagopal, Executive Director of the Cotton Textiles Export Promotion Council (TEXPROCIL), noted that the announced tariffs may not be final and expressed optimism that ongoing negotiations could lead to a reduction. “This is certainly a short-term setback,” he said, “but to cushion the blow and reduce India’s overreliance on the US market, we must fast-track free trade agreements (FTAs) with the EU and Canada.”

Although India recently signed a landmark Free Trade Agreement (FTA) with the UK, industry stakeholders caution that its benefits won’t be immediate. “Implementation will take at least four months. But we’re currently in the peak buying season, buyers are placing orders for the Spring-Summer 2026 collection, scheduled for delivery starting December 2025. This is when we typically secure our largest orders,” said AEPC Chairman Sudhir Sekhri.

He also warned that once international buyers shift their sourcing to other countries, it’s challenging to win them back. “It’s not that orders will completely stop coming to India, but the terms will become tougher, and profit margins will be severely eroded,” he added.

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